In the preface and first chapter of On the Firing Line: My 500 Days at Apple, Amelio sets the scene for his rise to CEO of Apple. He introduces the fascinating cast of characters in his new world: Steve Jobs, cofounder of Apple; Mike Markkula, financier of the company in its fledgling days; Michael Spindler, the soon-to-be-ex-CEO; Scott McNealy, founder of Sun; and a host of other competitors and consorts.

Play On

He who only sees business in business is a fool.

The unexpected is the nature of business, the nature of being a CEO. In fact the unexpected began months before I became the leader of Apple Computer. I was still running National Semiconductor and had recently joined the Apple board when, one day, Steve Jobs called.

I admit I was curious. Despite having many mutual friends, we had never met. Why was he calling? "I want to come over and see you," he said.

I watched his approach through the glass wall of my office and noted his athletic, bouncy swagger, weight balanced toward the tips of his toes--rather like a boxer, aggressive and elusively graceful, or like an elegant jungle cat ready to spring at its prey.

He was shown into my office precisely on time, looking quite fit in a classic long-sleeved sport shirt tucked precisely into well-pressed slacks; the grungy tennis shoes were a predictable Jobs trademark. (Within a few months, as Apple's CEO, I would be made to feel like a superstar; I noted that Steve looked like one--gracefully maturing with the luster of youthful glamour, a man who, I was about to discover, hadn't lost his notorious charisma.)

Steve projected both innocent charm and powerful intensity. He wanted something--but what? I couldn't think of a single likely reason for his visit. He was already running two companies--his computer firm, NeXT, and the computer-graphics movie company, Pixar Animation Studios, which had created the celebrated feature film Toy Story for Disney.

The conversation opened with the usual verbal dance, a brief exchange of hellos and empty conversation starters. Steve made some observation about "nice offices," though the National executive offices are in fact a boring no-design. It was just part of the small-talk ritual we both patiently waded through. I chatted a bit about what we were doing at National and why it mattered, and how I had long been a Macintosh fanatic . . . and wondered how he would turn to the topic that was the reason for his visit.

All at once he laid it on the table: Steve wanted me to champion his return as CEO of Apple Computer. "There's only one person who can rally the Apple troops," he said, "only one person who can straighten out the company." He had come to ask for my support, figuring I could convince the rest of the Apple board members to anoint him.

"Apple is on its way out of business," he said. "The only thing that can save it is a strong leader, somebody who can rally employees, the press, users, and developers."

When a possible solution is thrown at me unexpectedly, I like to back up a few steps to probe the depth of the person's level of understanding and see whether they're offering an innovative solution that holds true power, or are just dangling some easy fascination.

As a member of Apple's board, even if I didn't end up supporting his suggestion, I felt obligated to listen. After all, I thought, this is a man with knowledge and experience, the cofounder of Apple, and he might well have some insights that could benefit the company.

His theme was that the time of the Macintosh had passed and the company needed to focus on whatever would come next. "The world has changed, the Mac has outlived its usefulness, it's time to go on to something else." I don't think Steve would publicly say that today. I'm not even sure he'd admit ever having said it at all. It surprised me, so I continued to probe.

"If the Mac is dead, what's going to replace it?"

Steve didn't seem to have a clear answer.

I tried to get some of his thoughts about what else was going wrong, but couldn't even get him to identify problems, much less provide solutions. He seemed to have a set of one-liners and sound-bite answers that sidestepped all questions. Sidestepping is a nurtured skill of politicians (which may in time be Steve's destiny), but why was he using it on me? He talked enthusiastically about the importance of new ideas, and yet I couldn't get anything more from him than that he thought voice recognition was a waste of time and networking was important.

I continued to toss real-world queries: "Okay, suppose you were CEO tomorrow. What would you do? What would be the first decision you would make and why? What would follow?" And I was getting back those Carson-like one-liners. I began to understand what people meant when they talked about Steve's "reality-distortion field."

Clearly he wasn't in my office to sell me on the quality of his strategic ideas based on in-depth thinking about Apple. His pitch added up to, "Apple should make a change, I can lead the change, but I don't know what the change will be."

Steve has a very different chemistry than I do--he has the ability to charm people. I was looking for a fundamental understanding and some specific plans. Yet I couldn't help but admire, even envy, his eloquence.

When he realized I wasn't buying, he grew visibly irritated. I could see him trying to restrain his anger, but at one point he couldn't help snapping, "Maybe you have some better ideas."

What happens in so many of these meetings is that you reach a point where there's just nothing left to say. We sat for a long moment, I thanked him for stopping in; gracious once again, he thanked me for my time and walked out.

I had the feeling I had not made a friend of Steve Jobs. I wondered if this would be the first, last, and only meeting he and I would ever have.

Time plays absurd tricks. William Shakespeare might have seen this episode as one that would have foretold my doom. Perhaps I should have seen it, as well. Or maybe that would have required the insight of the Bard himself.

* * *

At Apple Computer, the unexpected had become the expected, the dream the reality, as a two-man company in a nowhere town grew into a national icon. But the glory became tarnished, the survival uncertain.

I became Apple's CEO full of enthusiasm and with every reason to expect success. The following pages chronicle the CEO's-eye view of what I saw and what I did in my 500 days--a verbal montage of impressions, interpretations, and thousands of decisions made at a breakneck pace without sufficient time for reflection; so many decisions--some wise, others woeful, some powerfully effective, some unavailing. And I could not know until much later which decisions would in time prove trivial, which impactful, which fateful. That's the nature of the challenge, and the fascination of the experience.

In these pages are brief episodes of soaring success, brutal failure, and elaborate folly. For the first time in my life, I would know the pain of delicious laughter that is followed by embarrassment and failure. One lifetime compacted into seventeen months.

This is a story of emotional highs and desperate valleys almost Shakespearean. But whether a tragedy or a comedy, you shall decide for yourself.

A Winter's Tale --

I AM HIRED

"What would you think about becoming a member of the Apple board?" The words resonated. I thought, Yes, I'd be right for Apple!

The caller was an old friend, but this wasn't social. Strictly business. Tom Friel, a headhunter at Heidrich & Struggles who had been hired to search for another Apple board member, remembered that a few conversations ago I'd shown an interest in taking on one additional board assignment.

Apple seemed a natural, considering my background as a Ph.D. technologist with a number of patents and my reputation as a business leader who had established a notable record for transforming ailing companies. Tom also knew I'd been a Macintosh fan for years, and was used to hearing me rave over the virtues of the Mac.

And Apple as a company holds an extraordinary fascination, virtually achieving the status of a celebrity in its own right. Luc Hatlestad described it in the pages of Red Herring magazine as having "a unique power to inspire emotions. . . . It's difficult to imagine any other high-tech company inspiring such heartfelt devotion."

That winter's day in early 1994 when Tom called was at a time when I had brought National Semiconductor from the brink of disaster to showing higher profits than ever. The company had by then progressed to what I call Phase Two of transformation--the less frenetic process of building from strength toward the goal of becoming great.

So my answer was easy. "But Apple's board needs to know that National is an important supplier of theirs. We sell them $25 or $30 million worth of chips a year. They need to be sure that's not going to be a conflict of interest."

Some people claim they can accept rejection easily; I think they're just better actors. Nobody likes to be turned down for something they want. It was uncomfortable when you were in junior high, it's still uncomfortable when you're a CEO. So when early winter turned to late spring and still no word from Tom or Apple, I began to wonder.

Then, in June, I was scheduled to cohost the annual dinner for the Silicon Valley chapter of the National Conference of Christians and Jews. This is an organization I've belonged to and supported for a number of years because of its dedication to principles of tolerance and acceptance, standing for values and the kind of follow-through that is fundamental to improving the human condition.

The other cohost that evening was an authentic Silicon Valley legend, A. C. "Mike" Markkula, Jr. As all Apple and high-tech followers know, Mike originally put up the money that launched Apple Computer. He had made a bundle from Intel when the semiconductor industry was still in its infancy and, recognizing the potential, had bankrolled the two Steves with $91,000 out of his own pocket, and arranged and guaranteed a $250,000 line of credit from the Bank of America. As a member of Apple's board since its beginning, Mike had also served as board chairman through most of the company's history. To say he was both powerful and influential is as obvious as saying that Rose Kennedy owned black dresses.

Mike and I were only slightly more than nodding acquaintances. For years our paths had crossed socially, and we seemed interested and involved in some of the same community organizations. I sensed a mutual respect and admiration, so sought out the opportunity at the NCCJ affair to bring up the board position.

Mike looked surprised. "We thought you weren't interested," Mike said, genuinely surprised to find out that I was. It was like the old children's game of Telephone, where a message gets whispered along the line and ends up completely different. Here we were at the highest corporate levels, going through only two or three people, and the message arrived as garbled as at any party of ten-year-olds.

This time Mike carried my message of interest back to Apple's board and got the wheels turning. On my next trip to New York, I was invited to dinner by the two people who formed the board's recruiting committee. We met at a private club, a vestige of an 1800s lifestyle, hidden from most people's eyes--including mine, until that night. An aura of old wealth and unspoken power hangs in the air, accentuated by the dark, highly-polished woods, subdued voices, and the sense that any secret spoken here is entirely safe.

Not that we had any secrets to share. At least not yet. I hadn't known quite what to expect, but this was not an examination of my ideas or even my style. This was not a "What do you think Apple should do now?" session but a getting-to-know-you opportunity, a chance to form an opinion of each other. They wondered if I would fit in with the board so that we could work amicably and productively together; I wanted to see if they could listen to me and to each other with respect and patience.

Frankly, I found both men impressive. Bernie Goldstein, a venture capitalist from Broadview Associates, is a true gentleman--caring and sensitive with a forthright way of getting close without your being aware of what he's doing. As I was to discover, he also has the backbone to become very tough when someone wants to spend company money. Peter Crisp, also a venture capitalist, is a founder and a managing partner at VenRock, a firm that invests Rockefeller money. Soft-spoken and charming, with flawless diction and the wiry build of a long-distance runner, he has an eternal twinkle in the eye that conveys the feeling you're with someone special. Peter had already made up his mind to leave the board on reaching his fifteenth anniversary of membership, then just a few months away, and was eager to find a strong candidate who could join before his time to leave.

At the end of that first meeting I felt not so much interviewed as agreeably entertained. When we parted, Peter and Bernie assured me I would be hearing further--and soon.

I called my wife, Charlene, at the end of the evening to share my impressions. Astute as always, she commented, "Something tells me it's going to take a lot more of your time than you think. Are you sure you want this?" Later I would light on this question as prophetic.

* * *

The vetting process wasn't over; Apple's then-CEO Michael Spindler wanted to see for himself who this Amelio was. I surmised he had picked up a scent of the board's growing restlessness with the company's performance and probably wanted his own take on whether, as a board member, I might line up against him, contributing to the negative pressure he was already under. The process was beginning to feel a bit like being considered by a fraternity that isn't sure it wants you, but I accepted Michael's invitation to visit.

Spindler was a native of Germany who had also lived in France, and had come to notice by making a notable success of running Apple Europe. John Sculley, the one-time head of Pepsi who was Apple CEO from 1983 to 1993, brought Spindler to work at Apple corporate headquarters. Known for his grueling eighteen-hour workdays, Spindler had been in the right place at the right time when the board ousted Sculley from the CEO job.

Under Sculley, the Apple share of the personal computer market had declined from about 20 percent down to a discouraging 8 percent. The company's fortunes would grow and glow again if market share could be jacked back up to earlier levels. In the waning light of late afternoon, Michael laid out his goal for the company, fully confident that restored levels of greatness were within reach.

The Spindler regime had sent more products to the market, faster and at lower prices. Desperate to drive up volume and regain market share, his team had opened new mass-market distribution channels that put the Macintosh on sale in chain outlets like Circuit City. But this fostered a mass-selling approach by "don't ask questions" clerks. The expression "If your only tool is a hammer, everything looks like a nail" fits the situation--Michael's team was applying a strategy that makes sense in a commodity business, while the Macintosh still depends on a buyer understanding its distinctive qualities. His aggressive stance on a mass-market strategy for Apple turned out to be a negative rather than a positive--in hindsight, probably a big mistake.

Spindler was also in charge when the PowerPC was introduced. The general opinion held that because it was cheaper, faster, and better, it was going to be the foundation on which Apple would make an impressive comeback. The strategy seemed to work big-time--by mid-1994, sales were growing again.

It was a false signal, an unsustainable spike in the curve. Apple marketer Debbie Carlton recalls, "We were trying to attract the first-time buyers, but we got into a lot of outlets where the sales people were okay with TVs and VCRs and sound systems, but really didn't know the Mac. They didn't know what made it better and they didn't know how to sell it."

The smiles around Apple soon looked as jaded as a jack-o'-lantern the week after Halloween. As Michael and I sat together at the tired end of a long day, he shared with me that sales were again very sluggish.

We explored the situation and he outlined his ideas for getting back to the Holy Grail of 20 percent market share. I couldn't help but admire his unflagging enthusiasm and his willingness to examine the dark side of the business. I would later come to recognize in him the Teutonic tendency to look at the most negative side of every challenge, brooding over problems rather than searching for a way to turn crisis into an opportunity.

I remember thinking, Our personalities are so different, he probably won't want me.

Give him credit--he wasn't bothered by our differences. I was elected to the board in November 1994, though I didn't actively start until after the holidays, in January 1995, nearly one full year after the first phone query. As things would turn out, it would be just over one year later that I would become Apple's fourth CEO.

* * *

Michael sat at the head of the boardroom table looking troubled, and started the meeting with a matter not on the agenda. He asked that the room be cleared of all staff and aides--he would speak only in the presence of board members, in "executive session." From the expression on Michael's face, it was clear to all that the subject wasn't the announcement of welcome news.

I waited for Michael to begin and noticed the tension on the faces of my fellow board members. "We're not making it, the company has to be sold." That was it. Michael had become convinced there was no way to keep Apple independent.

We would soon learn that Joe Graziano--Apple's chief financial officer, who was the other "inside" member of the company's board of directors--was very strongly in the same camp. Perhaps Joe had convinced Michael that the numbers just weren't adding up, or perhaps it was Michael's dour view that tainted the outlook for both of them; I would never know who got that flame ignited.

Over the next few months the camps formed and solidified. Graziano led the initiative to sell to IBM. Markkula bought the idea of selling, but thought the best sale could be made to Sun Microsystems. Spindler was promoting a European sale, to Philips, the Dutch electronics giant.

And my lone voice asked, "Why do we have to sell?" I had been working over the same numbers as the others but saw a different outcome: Sure, Apple's outmoded hopes and dreams must be dropped, but new workable ones could be substituted. To me, no way did the numbers add up to a desperation sale.

Perhaps because I had just led National Semiconductor back from losing half a billion dollars to what promised to be a record-breaking year, it looked to me like, Here we go again. I anticipated the attitude that the new boy on the board doesn't know all the problems and doesn't have all the answers, but I was experiencing that familiar feeling when faced with a challenge: Don't look for ways around, tackle the problems head on. I wouldn't make it easy for them to throw in the towel.

Powered by Graziano, Apple negotiations with IBM went on for months, but shuffled along like an old man in scuffs. Joe argued that IBM had made some big acquisitions, such as Lotus, and would come to see Apple as a good fit. All we had to do was play our cards right and Lou Gerstner would buy Apple and save the company. What Joe overlooked was IBM's history with acquisitions.

Big Blue has never been comfortable with acquiring other companies, and in this case they inched negotiations forward at an uncomfortable snail's pace. Graziano began to get testy at the board meetings--all he could report was that IBM wasn't responding. He groused at Spindler, accusing him of not pushing hard enough, and then griped at Markkula, complaining he was so interested in the possibilities with Sun that he was getting in the way of an IBM deal. Graziano wanted with such intensity to sell to IBM that he was unable to see the obstacles were all on IBM's side; he was blaming the wrong people.

My style as a corporate director is to participate more than many others, but I found it hard to get involved during my first months on Apple's board. I genuinely respected all of these people, yet together there didn't seem to be a team rapport. Generally, there's a high that comes when you're pulling together in a common cause--the old Mickey Rooney, "Hey, gang, let's put on a show" excitement that I have come to enjoy when serving on boards. These people were frustrated that the company wasn't successful and they wasted too much mental and motor energy thinking about how to find a buyer. Why waste this talent when it could be applied to building value in the company and improving it?

At one meeting I got steamed up. "Look, let's assume we're successful at selling this company to somebody. What's the first step they'll want to take? Fix the company's problems. Why wait for somebody else to figure that out? Why don't we get started on fixing the problems now? If we sell, the company will be in better shape, the buyer will be happier, and so will we. And if we don't sell, we'll be that much ahead of the game."

Sure, I had their attention . . . but I wasn't getting much in the way of affirmative head nods. I said, "We're not spending enough time at these board meetings talking about what're going to do to fix the damn company." But the board was focused on the problems of getting the company sold, and I wasn't finding the right way of getting my message through.

Perhaps the denial was understandable, given the range and caliber of Apple's problems at that time: lousy product quality; a massive disconnect in market forecasting, so that the company was consistently short of the products in demand while leaving the channels crammed with too many of everything else; high prices that were driving customers away; manufacturing techniques ten years out of date; and major software problems causing frequent computer crashes for users. Adding to that long list of ailments, the hugely profitable Japanese market was leveling off--we could no longer count on increasing Asian revenues to mask the company's other losses.

The pileup of negatives was definitely in our faces.

* * *

Apple's fiscal year begins October 1, probably so that Christmas falls in the first quarter. Santa Claus has long been kind to computer companies--PC manufacturers must be not far behind greeting card and toy companies when it comes to benefiting from Christmas shoppers. The holiday buying season starts in late October, and in 1995 Apple had soared off to a roaring start for the fiscal year. The numbers were looking sensational. All through the quarter, Michael had been advising board members that the company would make something like $150 million profit for the period.

But the truth lay elsewhere.

The December meeting began with ugly financial news. Now, at almost the end of the quarter, we suddenly heard that although there had been record sales, the company would lose money. Apple was selling more and making less. And the loss would be whopping--the quarterly totals would come to $69 million. To say we were stunned would be putting it mildly. Even the board's investment-banker advisors, like the colorful, hard-driving Frank Quattrone, had little to say that improved the mood of board members.

In Michael's defense, he had apparently himself been caught off guard. Wall Street Journal reporter Jim Carlton tells the story in his heavily researched 442-page tome, Apple. According to Carlton, both Jim Buckley, president of Apple Americas, and his counterpart running Apple Japan, John Floisand, thought Spindler had given his blessings to apply their standard routine of dropping prices to boost sales. They had done it with a vengeance, slashing prices as much as 25 percent. When Spindler found out, he was livid and verbally whipped his two sales lieutenants in front of the full executive staff, demanding, "How could you sell these things for a loss?" Their defense was that they had just been following his orders. Spindler is supposed to have barked back, "I asked you to move the units, not to wrap money around them!"

But always the courageous executive, Spindler had let the blame fall on his own shoulders rather than faulting his lieutenants. Admirable. Yet over and over again, I find that people--even top executives--wait too long before sounding a trouble alert or asking for help. Had Michael reported to the board what had really happened, once I became CEO I would have been alerted to the dangerous Apple sales process of price-cutting and channel-stuffing. Despite his honorable intent, Spindler's report provided us no sense of the underlying problem; I would be left to play Sherlock Holmes in order to find clues and motives behind the disappearance of the Apple profits.

By this time Sun had been making serious overtures. Board meetings started being held every week to further explore the Sun proposals. At one of these meetings, board member Peter Crisp was discouraged by the proceedings. He leaned over and casually said to me, "Gil, have you ever thought about joining Apple over here and helping the company?"

No, I hadn't. I promised to think about it.

I didn't know then, and still don't know, whether Peter had talked to other directors before making that oblique suggestion--or even whether he had been mulling it over beforehand or had instead just been struck with the idea on the spot. Obviously he didn't have the authority to offer me the job, but he had planted the seed.

I left on a prearranged eight-day trip to visit the National Semiconductor plants in Asia. The long arm of the media reached me in remote locations as reporters asked me about rumors that I was being considered by the Apple board to replace Michael Spindler. Clearly someone was feeding inside information; unfortunately the leaks would continue even when the leadership changed. Was it through one of the area associates (which is Apple-speak for "secretary"), or one of the top executives, or one of the board members? Though I have my suspicions, the truth will probably remain a Deep Throat mystery.

At the next board meeting after my return, I told Peter, "I've thought about what a really excellent situation I've got at National. I'm not keen on leaving. But Apple does have a major leadership problem. So, if the board is serious about me taking an active role within the company, I'll seriously entertain the idea."

Over the next two weeks that scenario rapidly played into action.

* * *

And the calls came rolling in. I particularly remember Regis McKenna, the PR guru and deal maker who, in the oft-repeated Valley legend, had been talked into helping a fledgling Apple by an arm-twisting Steve Jobs. His promotional efforts had been crucial to the company's success, and the Regis McKenna PR Company had continued as advisor throughout the Jobs, Sculley, and Spindler dynasties. Regis had attended the infamous High Noon shoot-out, the board meeting at which Steve Jobs and John Sculley had each tried to have the other fired. McKenna had sided with Sculley, against his old sidekick Jobs. Now Regis was telling me, "Gil, you're the only guy I know of in this business who has a hope of fixing Apple." I also heard a similar comment from Floyd Kvamme, who in the early years had been the company's first director of sales. Riding high on the flattery, it crossed my mind to wonder if I could get hooked on attention and adulation.

In the hallway during a mid-afternoon break in the continual board meetings to consider the Sun offers, Peter Crisp asked to speak to me privately. He seemed glum, almost somber, as he once again urged me to accept the leadership.

Though caught between a conflict of emotions--fear of the unknown and exhilaration of a new challenge--the time had come to move ahead or put the matter to rest. I replied, "If you come forward with a serious offer, I'll accept."

Peter moved fast to make arrangements. That Sunday afternoon I sat with Mike Markkula at his office in Woodside. The conversation quickly turned to compensation. "What do you have in mind?" I asked.

"Whatever you want."

"Fine. I'll write a wish list and we can go from there."

The next day I faxed him my list. As I assume he anticipated, I intentionally asked for more than I expected to get--including a generous $5 million sign-on bonus and a million shares of stock up front to make me a stockholder.

Mike responded rather rapidly and seemed nonplussed. Instead of negotiating, he merely said, "We can't really do this." I moved the conversation forward into a negotiation mode. Along the way, Mike asked me to draw up a comparison of what I was in line to receive if I stayed at National Semiconductor. The spreadsheet I prepared showed that, provided the company continued to improve its performance record at roughly the same level in a reasonable economy, my contract with National could earn me some $27 million over the next five years.

By nearly anyone's standard, $27 million is a huge amount. But to put the number into perspective, in the five years I had been leading National, the stock price had increased fourfold (had even at one point reached an eightfold increase) and the market capitalization had increased by some $3.5 billion.

Much as I was motivated to undertake the risky Apple challenge, I knew it had to make financial sense, which meant a compensation package tempting enough to give up the assured situation at National. Finally, in a conversation with Mike--not the time to play coy or be vague--I defined what I had come to see as the three essential elements: "The deal should offer me an increase in salary, it has to be attractive enough to protect my downside, and it has to offer me significant upside."

Translation: The "upside" would be a sizable block of stock options, so that if I did well and the stock picked up, I would be suitably rewarded for my success. Mike accepted this aspect with full understanding of the powerful incentive it holds for any key executive to have a significant ownership position in the company. I offered that the options could vest--that is, come into my control for sale or transfer--gradually over a period of five years, instead of the normal Apple practice of three years. Mike had no problem with this upside arrangement; it would turn out to be the only item to survive all the way through the negotiations.

The "downside" part of the equation meant providing that my family wasn't going to be worse off for me having taken this job. To protect me on the downside, we agreed on a million shares of stock to be received at the outset; even if I were never successful in reviving the company, at least this would replace the money that I would walk away from at National.

On the salary issue, Mike easily agreed to a roughly 30 percent increase over my National salary--from $770,000 to $990,000.

There would also be a sign-on bonus of $5 million.

Once we had a sense we were getting close, Mike brought Peter Crisp into the discussions. The three of us reached an accord that Mike said he would feel comfortable presenting to the board.

It wouldn't turn out to be as easy as that. Not by a long shot.

* * *

The next Apple board meeting was to be held in New York on January 31. I flew out as the guest of Mike Markkula aboard his Falcon 900 personal jet. We landed at LaGuardia and headed for the St. Regis, where the board members were staying.

The meeting started at 8:00 a.m., with all the board members present, including Michael Spindler, along with attorneys from Shearman & Sterling, one of the law firms representing Apple, in whose offices we had gathered.

The agenda listed only two items: the deal with Sun and what to do about a new CEO. Short agenda, very long meeting.

Scott McNealy, the dynamic and irrepressible founder/CEO of Sun, had been invited to attend. He arrived with the impressive backup of Larry Sonsini, the number-one attorney in Silicon Valley's most prestigious law firm, Wilson, Sonsini, Goodrich & Rosati. McNealy, who is an impressive thinker and convincing presenter, made a short pitch that showcased all the glowing reasons why it would be great for Apple to align with Sun.

And though I remained convinced that Apple could be saved as an independent company, I was impressed with some of Scott's ideas. I began to waver.

But Apple loyalist that I was and still am, I needed a few more answers. So I asked Scott what to me was one of the two most important questions: "If you buy Apple, are you going to keep the Apple brand name or are you going to drop it?"

Scott's answer: "We haven't really gone into that yet." This ran up a huge red flag for me. In that one response, he undermined a near-perfect presentation. Could it be that this smart, capable business icon was unaware the Apple brand name was something not only worth keeping but worth nurturing and promoting? How could he not have thought about the Apple name--one of the most cherished and valuable of the company's commodities? Something was not right, and for me, Sun was immediately way off base.

But the subject had turned to the number-one issue: Price. Apple was then trading around $28 a share, and the rule of thumb puts a fair price at 20 to 40 percent premium above the market price. I figured we didn't deserve the high end of that premium, because the company was performing so badly, but I certainly thought we'd be at the low-premium end-$33 or $34. Potential buyers try to lowball the price, of course; it seemed reasonable to consider $30 as a floor. I had told myself, It's got to be at least $30. And I believe most of the other board members had a number close to that in mind, though I think one or two were eager enough that they would have settled for market price--whatever the stock was trading at that day.

Then Scott McNealy dropped his bombshell: "This is our best offer--we'll pay $23."

I sat there dumbstruck, imagining a scenario: I'm named CEO, and my first order of business is to go out to all the shareholders and say, "We know your stock is trading at $28, and we know that on average you paid $34 for your shares, but we're going to offer you $23." I looked at him and said, "Scott, that's impossible. I can't get behind that at all."

If a major company ever sold for dollars a share less than its market value, I never heard about it. We told Scott and Larry we'd be in touch. When the door closed behind them, I said, "I was ready to go with the flow, but this is ridiculous. Forget it!"

The more the board talked, the more negative they came to feel about selling on those terms. Bernie Goldstein was of a different mind and he did, indeed, make a compelling argument: Even though the price had been as high as $50 not long before, at the current $28 the company was in fact overvalued, the price was going to go down, and maybe we ought to take what we could get while the offer was on the table.

At that point another scenario flashed through my mind: We announce the company is being sold to Sun at $23 a share. Financial analysts and investors immediately deduce that this must represent what the board believes is the true value of the company, and the stock price plummets to that level in a few minutes of trading. And probably keeps on going down, as confidence in the company erodes.

Since Bernie was point man for the sell-at-any-price camp, I asked him, "How do you get shareholders to accept this?" No answer, so I continued. "They'll think we're asking them to vote against their own best interests. I can't imagine you'll get much support."

By now it was dusk. The fantasy sight of the New York City skyline sparkled outside as the spark went out of our enthusiasm for the Sun deal. It began to look as if everyone had decided. Michael showed little enthusiasm but appeared ready to go along with whatever the board decided. A vote was taken and McNealy's offer was officially turned down.

From the comic Victor Borge I learned that laughter is the shortest distance between two people. Someone made a lighthearted remark and suddenly the board came together as we hadn't in a long time. It stayed that way through dinner, a humble meal hastily brought in to the meeting room by one of New York's many caterers.

* * *

It was already evening and the discussion of the CEO situation was only just ready to begin.

Mike Markkula, as chairman, requested an executive session. Michael Spindler must have known what was coming, but it's painful nonetheless. Throughout his life, he had gotten results by working harder than anyone else; now he was being told that hard work wasn't enough. Intensely frustrated that his heroic efforts had brought him to such a moment, Michael rapidly left the room.

The board quickly decided Spindler had to go, and Markkula went out to break the news to him in private.

To his credit, Spindler returned to share with us a few final comments, and it was a less difficult moment than I feared. He managed to be dignified, poignant, and moving, several times saying, "I tried the best I could." In the end there was a respect for this very decent man, even though the fight was out of him.

We then talked about a termination package for him. Peter Crisp and Apple's human resources director had already put together some numbers based on Michael's contract, and the board quickly agreed. I thought that Michael gracefully accepted what I viewed as minimal compensation given the weight of responsibility he had carried. Even so, some reporters would later view it as overgenerous.

* * *

I was caught by surprise when it turned out I wasn't the only candidate. Board member Jürgen Hintz had been a Procter & Gamble executive when he joined the Apple board, and he had left to head up a company in France. That hadn't lasted long, and Jürgen had been without work for several months. Now he piped up and said, "I'd like to be considered for the CEO position." Since he was a fellow director, the board felt obligated to consider his bid. I left the room so he could make his pitch and review his qualifications without a sense of the leading competitor judging his every word.

Jürgen then joined me in the lobby of the offices and we made awkward conversation. Since Peter Crisp and Mike Markkula had been urging me to accept the job, I could count on their support. Probably the same with venture capitalist Bernie Goldstein, who had been one of my interviewers before I was accepted on the board.

I was less certain about Franklin Delano Lewis, the head of National Public Radio. A highly capable and gifted man, Del was well experienced in the role of corporate director and well skilled in how to operate at a board level. There's a certain chemistry to the way boards work, which I had already discovered Del to be a master of. We had mostly seen eye-to-eye on board matters, but I had no reading of where he might stand on me as CEO.

Soon Mike Markkula came out to shake my hand: The board had voted to pursue negotiations with me. I had been fairly certain of the outcome, yet the actual moment was tingling.

* * *

Opening the discussion in front of the whole board, Mike asked, "The Sun deal is probably dead, but it may not be. They may come back with a richer number. Right now, we just don't know. Would you take this job under those circumstances?"

I said, "Yes, but not if the board is going to accept a price below market. I don't want to be put in that position." They agreed, which for the moment put the final nail into the deal with Sun--or so I thought.

Three hours till midnight. We had been at it for some thirteen hours, with a final area still to be resolved: "Okay, Gil, we're going to offer you the job. What should your compensation package be?" Though I assumed the other members had already been brought up to date on this, I described the terms that Peter and I had settled on.

Once again I was invited out of the room for what I expected to be a rather brief courtesy event. Nearly an hour and a half later, I was finally summoned back. The other directors, thinking we had a deal, began to filter out and head for home or their hotel room, until the only ones remaining were the board's two-man compensation committee, Mike Markkula and Peter Crisp, along with the Shearman & Sterling attorney. Mike ran down the terms of the offer they had concocted, which was substantially below what I was making at National, and less than Michael had been getting--no downside, no upside, more like upside-down!

I couldn't know whether this was good-faith negotiating--a conscientious board protecting the stockholders by trying to strike the best possible deal for the company--or whether Mike had been strangely silent about the terms he, Peter, and I had arrived at. Who was it that said, "Look at the barriers you encounter only as navigation problems. They are not dead ends but merely detours."?

I was just short of angry; perhaps I should have seen this as a warning sign. Instead I determined to be decisive but not let my annoyance show--tough at 11:00 p.m. So, perhaps with too much emphasis, I said, "No! That won't do." I then patiently went through the same points about salary, upside, and downside, and showed them the spreadsheet I had prepared on my projected earnings at National.

When we stopped for a short break, I got the chance to take Markkula aside. I said, "Mike, I don't want to rain on everyone's parade here, but you know my criteria. Meet those conditions and I'll do it." The others convened once again without me. I decided to clear my mind and try a glass of plain old New York City tap water. A New Yorker by birth, I was still in a few ways a New Yorker, and laughed to myself at how right "Guiliani water" tastes.

Finally--it was nearing midnight--they settled on a more reasonable offer, which was immediately put into the form of a term sheet by the Shearman & Sterling lawyer and typed up by a secretary who had been kept on standby for just such a need. The salary was pegged at the number Mike and I had originally settled on--$990,000, which represented a nominal increase over Spindler's $900,000. The other terms were also in line--a million shares of stock, with restrictions on the sale, and another million of options, plus the $5 million sign-on bonus.

The salary would be augmented by a performance-based bonus. A common pattern for executives, and the tradition at Apple, called for a standard bonus equal to 100 percent of salary, but with possibilities ranging from nothing in the case of poor performance to a maximum of 200 percent. But hoping to provide an added incentive, they had pegged my maximum at 300 percent.

The term sheet would also specify that if another company acquired Apple and wanted me, then I would be obliged to stay on for at least a year, even though I would no longer be the head of an independent company. I wasn't keen on the idea, but agreed because it felt like the right thing to do. If the acquiring company decided they could do without me, then I got an all-in settlement of $10 million.

Did I and do I believe I was worth that much money? The value of a corporate CEO, like the value of an athlete or network anchor, is based on how much it takes to attract one of the handful of people who are qualified for the position. Compared to what a top marketing manager earns, or a sales rep, or, for that matter, a CEO in England, France, or Germany, I would say there isn't any CEO worth the money that a Lou Gerstner, a Michael Eisner, or a Steve Ross gets. And I'd say the same about the earnings of a Michael Jordan and a Dan Rather. But in a highly competitive marketplace, a company, sports team, or television network will pay what it takes to takes to attract talent. Those who can command sky-high incomes benefit from the competition. That's the reality--the old supply and demand at work in a free economy. Is it fair to all the other people who may be working just as hard? No. Is it going to change any time soon? Same answer.

Overall I was well satisfied with the deal. But the next four or five weeks would prove to be highly distressing, giving me an unwelcome view of what life at Apple was going to be like.

* * *

Mike Markkula and I finally boarded his plane at 1:00 a.m. for the return to California, unaware that terms of the deal had already been leaked to the press and posted on the Internet.